Why engagement, not punishment, is the key to a sustainable palm oil supply chain

To achieve a truly sustainable palm oil supply chain, a long-term, dogged effort and engagement with suppliers works more than just taking punitive action, says Global Agri-Resources head of sustainability communications Lim Shu Ling.

Golden Agri-Resources' suppliers attend a 'Smart Seed' workshop organised by the company in Medan, Indonesia in September. Image: Golden Agri-Resources

At the end of it, Greenpeace criticised palm oil traders (including GAR) for not taking more action to ensure compliance in their supply chain including their suppliers’ subsidiaries.

Greenpeace went on to call for “proactive monitoring at group level, accelerating independent third-party auditing (to standards such as the Palm Oil Innovation Group (POIG)) and clear unequivocal demands for compliance that carry the consequence of exclusion”.

Greenpeace appears to be seeking a commitment to an ever-watchful Orwellian Big Brother approach to supply chain management with punitive measures against suppliers who are not yet meeting standards as their key method of delivering change.

GAR’s experience is that such an approach is neither practical in a vast and complex agricultural supply chain nor is it likely to bring about the industry-wide changes in behaviour that Greenpeace is pursuing.

Disagreeing with Greenpeace’s “supply chain cop” approach to punishing the bad guys doesn’t mean GAR is not taking responsibility for its supply chain.

Quite the contrary, our investments in supply chain engagement have never been greater.

We know the 489 individual mills which supply us in Indonesia. We know their exact GPS coordinates which helps us determine if they are near or based in sensitive eco-systems. We also know their legal details and whether they have obtained certification in sustainable palm oil.

Getting this sort of information may look like a cake walk. But we had to overcome initial resistance and suspicion regarding our motives in wanting to document this information.

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An approach that leads with punishment does not work. GAR will take that step where and when necessary but we believe exclusion should be the tool of last resort, not the starting point.

We have a dedicated Supplier Support Team, which as the name suggests, is there to help suppliers with sustainability issues.

All this builds trust and a stronger working relationship with our suppliers. This is absolutely key in helping them understand and be willing to make the changes to achieve sustainable palm oil production.

An approach that leads with punishment does not work. GAR will take that step where and when necessary but we believe exclusion should be the tool of last resort, not the starting point.

Firstly, while GAR continues to improve its due diligence and supply chain data collection it is unrealistic to think that we will ever have a 24/7, all-encompassing information system for each of our thousands of suppliers and their subsidiaries.

To do this, we would have to become a full-time supply chain auditor and monitoring agency a la Big Brother or the NSA.

It’s hard to imagine any supplier willing to engage with us in this scenario, and even harder to imagine they would want to share serious problems and issues with us.

Secondly, through trial and error, we realised that while taking punitive action against errant suppliers might earn us external kudos, in reality, it achieved nothing.

Suppliers who were dropped simply shrugged it off, turned to other buyers who have laxer standards, and continued their bad behaviour.

We have learnt that if we are really serious about improving the standards across our supply chain, we have to be down in the trenches with them.

Thirdly, we are not talking about a homogenous supply chain. Our suppliers range from big companies to medium and smaller-sized ones and individual farmers.

There is no one-size-fits-all solution. We have to try out various approaches to see what works best with our different suppliers.

This involves taking into account real, practical issues such as the extent of their resources and their ability to bear the cost of adopting sustainable practices.

Reports by NGOs have specific aims and are designed to zoom in and emphasise shortcomings and negatives, employing a traditional and somewhat clichéd strategy to push for change.

Contrary to the gloomy picture painted of the palm oil supply chain, we have had success stories born of long-term, dogged effort and engagement.

Look through our Grievance List on the Sustainability Dashboard carefully and you will see evidence of suppliers who are willing to listen, to accept advice, to engage, to write new policies and strengthen their practices.

Excluding suppliers is easy while accomplishing nothing meaningful. But going the distance with them, investing resources, time and energy – that’s the true test of how fully committed we are to lifting the standards of our supply chain and the industry.

Lim Shu Ling is the Head of Sustainability Communications at Golden Agri-Resources. She has previously worked for the BBC and the UNDP.

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